Raising Finance

How can specialist stores reinvent to keep up with the giants?

4 min read

24 January 2017

Former special projects journalist

Specialist stores that provide expert advice are at risk of being driven off the high street - here, we look at what they can do to keep pace with the giants.

Many highstreet stores have taken a hit from the giants and online stores in recent years, and specialist stores have a unique set of challenges. Here, we explore how each can keep pace with the changing market.

In the internet age, more than ever, small and growing specialist stores are competing directly with the giants. It’s a common sight to see someone Googling a product in-store to see if they can find it cheaper somewhere else, and some smaller businesses may struggle to keep pricing competitive.

This can be particularly frustrating for specialist stores. Say you run a camera store. Before a consumer spends upwards of £500 on a camera or piece of equipment online, they might want to see the item, feel it and look it over. What do they do? They might head to your store, but that doesn’t guarantee you the sale.

“Customers expect an online presence. They often will look at an online presence and then want to go to a retailer to physically touch the goods,” said Alex Marsh, managing director at Close Brothers Retail Finance.

“This is particularly the case with specialist retailers but they want to then have options around payments.”

In other words, customer behaviour is changing – people not only want the best price, they want different ways to pay. Increasingly, this means being able to settle the bill by card, cash, or finance.

“In the context of retailers, there has probably never been a more challenging or complex time in terms of both customer behavioural changes and market changes,” said Marsh.

Below the £250 mark, people generally don’t want to fill out an application for finance. However, specialist retailers are more likely to sell expensive items and there is a growing expectation, especially with younger customers, that they should be able to spread the cost of these items over time.

In fact, Marsh believes that eventually it will reach the stage where customers will simply assume they can pay by finance and it will feel “alien” not to be given the option.

This might seem daunting to some small specialist retailers – looking up the rules and regulations with the Financial Conduct Authority (FCA) and getting all the right permissions can certainly seem like a headache, and there might be rejection from larger banks.

However, there are companies that can help small businesses provide unregulated loans, which is possible if they are interest free and paid back in no more than 12 instalments.

This type of finance comes in to its own when used as part of the sale, rather than just offered at the end of a closed sale as a payment option.

For example, a customer may be able to go online and find the product slightly cheaper, but if they must pay in one go this might still be less attractive than a more expensive price spread out over 12 months. Bear in mind this is not necessarily finance for luxury items, it could be a customer simply looking to replace a broken fridge and who doesn’t have the upfront disposable income.

At the end of the day, everyone loves a bargain and offering finance alternatives can even help drive sales and brand loyalty. Keeping up to date on payment options and changing customer behaviour is crucial for any small, specialist retailer looking to take on the giants.